Thursday, March 11, 2010

Today's Headlines


  • Goldman(GS) Hedge Fund Head Flamand Said to Start Own Firm. Pierre-Henri Flamand, the head of Goldman Sachs Group Inc.’s largest internal hedge fund, is retiring from the world’s most profitable securities firm to start a hedge fund, according to three people with knowledge of his plans. Flamand, 39, has worked at Goldman Sachs for 15 years and has run Goldman Sachs Principal Strategies from London since 2007. He didn’t respond to calls or e-mails seeking comment. A Goldman Sachs executive in London confirmed the departure and said the company supports Flamand’s plan.
  • A proposed transaction tax for stocks and derivatives trades would "turn back the clock" two decades, hurting investors and businesses as much as the bankers it targets, the U.S. Chamber of Commerce said in a report. The measure proposed by Senator Tom Harkin of Iowa and Representative Peter DeFazio of Oregon would cut trading volume, damaging the ability of businesses to "fuel expansion and keep people employed," David Hirschmann, head of the chamber's Center for Capital Markets Competitiveness, said.
  • Natural Gas Drops to 15-Week Low on Ample Supply, Mild Weather. Natural gas futures fell to a 15- week low in New York after a weekly government report today showed supplies of the fuel will be ample during milder-than- normal weather at the end of the heating season. Inventories shrank 111 billion cubic feet in the week ended March 5 to 1.626 trillion cubic feet, according to the Energy Department report. Supplies were 1.2 percent above the five-year average, unchanged from the last week’s report. “We’re going to end the heating season a little bit above the five-year average,” said Tom Orr, research director at Weeden & Co., a brokerage in Greenwich, Connecticut. U.S. inventory levels for this cold-weather season reached a record 3.837 trillion cubic feet in November as higher output swamped a market where industrial demand was weak because of the recession.
  • U.S. Foreclosure Filings Increase at Slowest Pace in Four Years. A total of 308,524 properties received a notice of default, auction or seizure last month, or one in 418 households, the Irvine, California-based seller of default data said today in a statement. Filings rose 6 percent from a year earlier, the smallest increase since RealtyTrac began tracking annual changes in January 2006. They declined 2 percent from January.
  • Economy in U.S. to Cool as Drivers of Growth Shift, Survey Says. Efforts to stabilize inventories will contribute less to the U.S. economy in coming months, leaving business investment and exports to propel growth, according to economists surveyed by Bloomberg News. The world’s largest economy will expand at an average 2.75 percent annual rate in the first six months of the year, down from a prior estimate of 2.9 percent and a 5.9 percent surge in the fourth quarter, according to the median estimate of 52 economists. The survey, taken from March 1 to March 10, also showed the outlook for consumer spending improved.
  • Stock Momentum Measure Signals More Gains: Technical. The yearlong rally in the U.S. market has pushed the number of stocks showing unusually strong momentum to the highest level since at least 1994, a sign that more gains may come, according to Concept Capital. The New York-based institutional broker defined “overbought” as when a stock’s 21-day stochastic reading exceeds 80. On March 9, 77 percent of the companies in the Standard & Poor’s 1500 Composite index reached that threshold, exceeding the previous high of 74 percent in April, Concept Capital said. “While a sign of a short-term overbought condition, which could usher in a pause, readings this extreme have historically led to higher prices over the next several months,” John Kolovos and Craig Peskin, technical analysts at Concept Capital, wrote in a note to clients yesterday. Using stochastics, which analyzes momentum to capture a security’s turns in direction, Kolovos and Peskin identified the previous nine most overbought conditions from 1994 to the present and found that, following these days, the S&P 1500 on average rose 1.9 percent in one month, 4.7 percent in three months, and 8.5 percent over the next six months. The current spike in the S&P 500’s level of overbought stocks is the fourth highest dating back to 1990, the Concept strategists said.
  • China Tightens Land Purchase Rules, Bans Villas. China is requiring a down payment for land purchases equal to 50 percent of a plot’s price and prohibited the supply of land for villas as the government sought to increase affordable housing. The down payment must be paid within a month of signing the purchase contract, the Ministry of Land and Resources said in a statement on its Web site late yesterday. Buyers must also pay a deposit when taking part in land auctions that is equal to 20 percent of the minimum price for the land.
  • Iran Oil Fund to Expand If Crude Stays Above $65. Iran, holder of the world’s second- biggest oil and gas reserves, will add to its oil stabilization fund if crude prices remain over $65 in the coming 12 months, the deputy central bank governor said. “As long as the price of petroleum is over $65 per barrel Iran will gain extra petroleum revenue, which will find its way into the oil stabilization fund,” Hossein Ghazavi said in a phone interview from Tehran late yesterday. He declined to comment on the current balance of the fund, which is aimed at providing protection for the economy should oil prices slide. The oil fund “is essential, as it is a rainy-day fund but it is also a very politicized one, as the president has used the money for his own political purposes,” said Mohammed Shakeel, an economist who covers Iran for the Economist Intelligence Unit in London. Oil accounts for more than 80 percent of the government’s revenue, Shakheel said. Rising prices have helped the central bank increase its foreign currency reserves. Iran’s reserves have surpassed $100 billion, Ghazavi said in an Oct. 13 interview, declining to provide a more specific figure.
  • CBOE Files to Raise as Much as $300 Million in IPO.
  • GMAC Executive Pay Packages Questioned by TARP Panel. GMAC Inc., the auto and home lender rescued by the U.S. government, may have overpaid its top executives after receiving taxpayer funds, according to a report by the panel overseeing the Troubled Asset Relief Program. Pay packages for executives at GMAC and other TARP recipients “raise significant questions, which the panel will continue to study,” the Congressional Oversight Panel said in a report released today. “These include whether particular levels of compensation are either necessary or appropriate.” GMAC, the primary lender to General Motors Co. and Chrysler Group LLC car dealers, is subject to the panel’s scrutiny after receiving three government bailouts totaling $17.3 billion starting in 2008. The Detroit-based company is now 56.3 percent owned by U.S. taxpayers.
  • U.S. Household Worth Rose at Slower Pace Last Quarter. Household wealth in the U.S. grew in the fourth quarter at a slower pace, limited by a drop in home values that indicates the recovery in consumer spending will take time to gain speed. Net worth for households and non-profit groups rose by $700 billion to $54.2 trillion, marking a third consecutive gain, according to the Federal Reserve’s Flow of Funds report issued today in Washington. Wealth increased by $2.78 trillion in the third quarter.
  • Obama's $79 Billion Tech Plan May Favor Web Programs. Vivek Kundra, the Obama official with $79 billion to spend on technology, said the government can be more efficient by putting programs on the Web, paving the way for companies like Microsoft Corp.(MSFT) and Google Inc.(GOOG) to win business. The government wants to put data such as health-care pricing information on Internet-based systems as they grow more secure, the U.S. chief information officer said in an interview this week.
Wall Street Journal:
  • Rattner in Talks to Settle a Probe. Pension-Fund Official's Guilty Plea Puts Spotlight on the Former Auto Czar. Wall Street financier and former auto czar Steven Rattner is in settlement talks to resolve his role in the "pay to play" investigation at the New York state pension fund, according to people familiar with the matter. A guilty plea on Wednesday by David Loglisci, the former chief investment officer of the $129 billion fund, turned a spotlight on Mr. Rattner, a well-known Wall Street player who last year spearheaded the Obama administration's auto overhaul. On a call with reporters, New York Attorney General Andrew Cuomo said the 57-year-old Mr. Rattner remained under investigation but declined to provide more details. For months, Mr. Rattner's lawyers have been engaged in protracted settlement discussions with both the New York attorney general and the Securities and Exchange Commission over his conduct in the case, said the people familiar with the matter. Mr. Rattner left Quadrangle a year ago to join the Obama administration. He is working on a book about the experience of restructuring the industry in a matter of months.
  • Google(GOOG) Gains Traction In Display-Ad Push. Google Inc. is signing up marketers to use its latest display-advertising technology, pressuring rival Yahoo Inc. and advancing the search giant's effort to change the way ads are sold across the Internet. Google is championing a new stock market-like system for buying display ads. Using its exchange, ad buyers and sellers are matched to ad spaces in a real-time auction. Ad buyers calculate how much they are willing to pay for a particular ad position on the fly, based on how likely the ad is to be seen by the types of viewers they are targeting. Google released its new technology, called the DoubleClick Ad Exchange, in September. Yahoo has run its own exchange, called Right Media, for years, but has only recently begun to roll out real-time bidding. "Google has more firepower right now," said Matt Spiegel, chief executive of Omnicom Group's digital ad buying unit OMG Digital. "I'm convinced that the other key players in the space recognize the risk."
  • Greek Borrowing Costs Imperil Budget Plans. The high interest rates Greece must pay to borrow money are threatening the county's ambitions to cut its deficit, raising again the specter it may need external aid. Many in Europe breathed a sigh of relief last week when Greece successfully sold €5 billion ($6.85 billion) in government bonds in an auction that saw investors clamoring for the debt. The sale was seen as a key test: The country needs to borrow about €54 billion this year. But debt buyers are demanding higher premiums than officials in Athens anticipated when they planned the 2010 budget.
  • Hedge Fund Law Coming to a Head. Most of the focus at the meetings next week of European finance ministers will be on Greece. But there is another issue which is coming to a head: the Alternative Investment Fund Managers directive. This is the proposed European law that will govern the managers of hedge funds, private equity and venture capital funds in Europe. It’s being discussed this morning by the European Union ambassadors. If they agree it’s ready, the proposal will move on to the finance ministers meeting next Tuesday. The proposed law is meant to have three objectives: investor protection; control of risks to the financial system and transparency of the operations of fund managers. The latest text from the Spanish presidency that the ambassadors are discussing is here.
  • 4 Biotech Takeout Targets. Astellas Pharma's (ticker: ALPMY) surprise $3.5 billion offer last week for OSI Pharmaceuticals (OSIP) marks the Japanese drug maker's second hostile attempt to buy a U.S. company. The bid also signals a return to the days of industry goliaths feeding on small and midsized drug makers. That could eventually lead to bids for companies such as Dendreon (DNDN), Allos Therapeutics (ALTH), Alexion Pharmaceuticals (ALXN) and Auxilium Pharmaceuticals (AUXL), and a big payoff for their shareholders.
The Business Insider:
  • Officials Urge Illegal Immigrants to Cooperate in U.S. Census to Benefit N.J. The irony is rich. In many contexts, much of the time, immigrants without proper papers are demonized as men and women — and children — who cause problems for properly documented citizens. But, at least for the next few months, they will be the darlings of government, urged to come out of hiding and anonymity, coaxed to put away their fears of separation from family, arrest, imprisonment in immigration jails and deportation. Because, after all, they have to be counted in the 2010 Census. They have to be counted so New Jersey can get more money for education, health care, transportation and other services. And maintain its current number of Congressional representatives. Dressel joined a number of local, county, state and federal officials the other day for what had all the appearances of a political rally in Perth Amboy. But the point of the rally wasn’t to get out the vote for a candidate, but to find the uncounted, especially among those who might be afraid to be counted. At stake is how $400 billion in federal formula-based aid is distributed. At stake also is how many members of Congress are allotted to each state. Wilda Diaz, Perth Amboy’s mayor and a champion of counting the uncounted, says ICE should consider a moratorium on the raids during the decennial census. "We have to allay their fears," she says.
Business Wire:
  • Fitch Solutions: U.S. Subprime Prices Switch Gears, Up Over 6%. U.S. subprime RMBS prices reversed course this past month, with most vintages increasing in value, according to Fitch Solutions in its latest CDS of RMBS indices results. Fitch Solutions' U.S. Subprime RMBS Total Market Price Index increased by just over 6% month on month to 7.63 as of March 1 (up from 7.17 at Feb. 1). All vintages increased in value, with the 2006 vintage performance the strongest with a 17% increase. Additionally, the 2005 and 2004 vintages increased by 9% and 3% respectively, month on month. The lone outlier was the 2007 vintage, which declined by 2% hitting its lowest ever value at 2.06. Recent loan level analysis conducted by Fitch Solutions on the indices' constituents found that declines in both the Constant Prepayment Rate (CPR) and Constant Default Rate (CDR) drove the rise in value for the 2006 vintage. Three-month CPR fell to 1.8% from 2.4%, while the three-month CDR declined from 26.3% to 25.7%. Historical 60-day delinquencies also decreased from 1.77% to 1.65%.
Washington Times:
  • Bush's Union Transparency Rules Retracted Under Obama. The Obama administration promised increased transparency in government but has rolled back rules proposed by the Bush administration that expanded the financial disclosure statements required of labor unions and their leaders. Since President Obama took office, the Labor Department has rescinded or delayed three sets of rules proposed by the George W. Bush administration that would have required unions and their leaders to more specifically detail their finances, according to a review of records by The Washington Times. The rules were rolled back while the Obama administration was seeking more stringent regulation of corporate America, including banks, insurance companies, health care providers and publicly traded companies. The proposed Bush rules would have required labor unions to identify from whom they were buying and selling assets, forced union leaders and employees to file more detailed conflict-of-interest forms, and required unions to reveal the finances of hundreds of so-called labor trusts - largely unregulated entities set up to provide benefits for members. Former Labor Secretary Elaine L. Chao, one of the architects of the expanded Bush rules, said the Obama administration is "making a mockery of the regulations" and is giving "preferential treatment" to the unions. "This administration is not enforcing laws on union transparency and democracy," Ms. Chao told The Times. "They are telling unions that they don't have to comply."
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-two percent (42%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -18 (see trends).
  • Chris Dodd Goes Forward Without GOP. Senate Banking Chairman Chris Dodd, concerned that bipartisan talks are losing momentum, will unveil his own financial reform bill Monday without the full support of his Republican negotiating partners. Corker blamed the Obama administration’s approach on health care for pushing Dodd to move ahead with his own bill next week. “There’s no question that White House politics and health care have kept us from getting to the goal line,” Corker said in a news conference Thursday, saying Dodd told him Wednesday he felt he needed to get a financial reform bill out of the banking committee before the Senate uses the procedural tactic known as reconciliation to push health care through the chamber by a majority vote. “The elephant in the room is reconciliation and trying to get a bill out of committee before that time… . He is a victim of health care policy,” Corker said of Dodd. Some Democrats scoffed at Corker blaming reconciliation. “God bless Bob Corker. We appreciate all the help he gave us but at some point we just can't wait,” said Sen. Dick Durbin (D-Ill.) “Senator Baucus spent 61 different meetings with Republicans trying to get something on health care. There reaches a point where you have to accept the inevitable.”
Real Clear Politics:
  • China's Bubble Trouble. The bubbly enthusiasm that many analysts express about the Chinese economy reminds me of the old-time variety show host Lawrence Welk, who banished worries each week with soothing sounds from his "Champagne Music Makers." China watchers should turn off the music and listen to Premier Wen Jiabao, who has been surprisingly frank in warning that overinvestment and lack of domestic demand are producing an economic bubble in his country.
  • More Americans Say Global Warming Exaggerated: Poll. A growing number of Americans, nearly half the country, think global warming worries are exaggerated, as more people also doubt that scientific warnings of severe environmental fallout will ever occur, according to a new Gallup poll. The new doubts come as President Barack Obama is pressuring the Congress to produce legislation significantly cutting smokestack emissions of carbon dioxide and other greenhouse gases blamed for climate change problems. With congressional elections less than eight months away, many lawmakers are hesitant to take on a controversial energy and environment bill, especially if voter interest is waning. The result comes on the heels of well-publicized reports that some of the details of scientific findings that went into international global warming reports were either flawed or exaggerated. The United States has made a non-binding pledge to the world to seek a 17 percent reduction in carbon emissions by 2020, from 2005 levels, mostly by switching to more expensive alternative energy, such as wind and solar power.
  • Exxon Mobil(XOM) Boosts 2010 Capital Spending 4%.
  • U.S. Commercial Paper Market Rises in Week.
Financial Times:
  • Push For Clearing Houses Fails to Move Oil Traders. Big oil traders are choosing to keep more derivatives deals private, in spite of a global regulatory campaign to steer such contracts to clearing houses. Their willingness to take on risks viewed as intolerable just a year ago reflects renewed faith in the strength of their trading counterparties, but also highlights a preference for opaque markets without a nudge from regulators. Regulators in the US and Europe want most derivatives trades to be settled and guaranteed by clearing houses.
  • German energy consumption fell by 6% in 2009, the lowest since the start of the 1970s, as the economic slump prompted companies using a lot of energy to cut back power use, citing the Association for Energy Balance.

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